The future of health care claims processing

By Julie Malida, Principal, Health Care Fraud Solutions, SAS

In an effort to contain costs, health care organizations (HCO) are changing the way they pursue claims overpayments. Traditionally, the focus was mainly on fraud. But today – in a process more broadly labeled payment integrity – plans are seeking to uncover a wider range of abuse, waste and errors in claims processing. And data-driven analytics is making that possible.

The past

Historically, HCOs had few tools for uncovering fraud and most of them did not involve analytics. Along with tips from law enforcement, outlier models and business rules, HCOs relied heavily on claims adjusters to spot anything suspicious. But keeping adjusters up to date on the latest fraud schemes requires ongoing training.

The [insurers] that survive in the new world will be the ones that can trim waste to offer the most competitive rates.

Also, in order for a claim to qualify as fraudulent, you must prove in court that an intent to deceive for the purpose of financial gain existed. Less than 10 percent of the money lost to fraud was ever recovered this way. What’s more, fraud accounts for only a fraction of the total loss due to billing errors. According to Stonegate Advisors, in the US alone, payment integrity issues point to a staggering $800 billion in health care losses each year.

That’s why many HCOs are moving away from the pay-and-chase model. Now, they are looking beyond the claims department and taking an enterprisewide approach to spotting errors, abuse and waste throughout the entire claims process. The goal is to spot fraud and billing issues earlier in the cycle and stop losses before they occur.

The present

Payment integrity covers a broad spectrum of behavior from organized crime to simple mistakes in filling out a form to eligibility fraud. It also covers subrogation, where another company is responsible for a piece of the claim – for instance, an auto accident where liability should be split between the medical insurer and the auto carrier.

A key enabler in payment integrity is data-driven analysis. Analytics can quickly search though unstructured textual data in claims. It can mine through electronic medical records, call center logs and information from provider offices. Analytics can also analyze third-party data and point to possible collusion – for example, a doctor’s office making large purchases from a medical supply store it also owns.

Analytics can provide insight into complex schemes that are difficult or impossible to understand with traditional techniques. Analytics also builds consistency and creates a common platform for decision-making between various departments within an organization. In other words, analytics gives you a single version of the truth.

The future

Why is payment integrity so important? Because it plays a key role in helping HCOs contain their costs. Since the Affordable Care Act (ACA) passed in 2012, insurers have had to price plans in a way that keeps customers happy yet still produces a profit, albeit a thin profit.

The ACA includes a number of strict regulations that put tremendous pressure on HCOs to reduce costs. For example, the act requires insurers to pay out that 80 to 85 percent of premiums on claims. That leaves only 15 to 20 percent left for administration and profit.

Many insurers are merging in an effort to gain the benefits of size and scale to help manage costs. At the same time, HCOs are competing on public exchanges. The ones that survive in the new world will be those that can trim waste to offer the most competitive rates. Advanced analytics is helping provide an answer.